WASHINGTON – Puerto Rico and Obama administration officials said on Thursday it is imperative that a House bill designed to help the commonwealth be passed into law before the territory's expected debt payment default on July 1.
"We need the bill by July 1. We need the bill yesterday," said Puerto Rico Gov. Alejandro Garcia Padilla at an event here held by the Center for American Progress Action Fund. He originally opposed the legislation while the House was drafting the bill.
The bill, called PROMESA, is currently held up until the Senate considers it, probably next week. That leaves a very tight deadline for passage before the July 1 goal. It also eliminates the possibility of any amendments in the Senate, because the House would not be back to consider them until after July 5.
Senate Majority Leader Harry Reid, D-Nev., said this week that Senate Democrats have "some serious concerns" about the legislation and he and others have said they would like time to offer amendments to the bill.
Timing on the bill as the payment deadline approaches has become so important because the bill contains a provision that would stay all creditor lawsuits filed between last December and the date PROMESA is enacted, according to Antonio Weiss, a counselor to the secretary of the Treasury.
Puerto Rico faces a $1.9 billion debt payment on July 1, $800 million of which is on constitutionally backed general obligation debt. Garcia Padilla said Thursday that defaulting on the payment "is not an option; it's just a reality" that will lead to creditor lawsuits.
"If I shut down the government on July 1, even then I won't have enough money to pay," he said. "From the creditors' perspective, they should be trying to find a way for Puerto Rico to get out of this, not to add obstacles in this race."
The governor said the territory already faces debt-related lawsuits, including one filed this week by hedge funds holding Puerto Rican general obligation bonds after debt restructuring talks broke down. He added those creditors are asking the courts for temporary relief and embargoes on Puerto Rico's access to funds. If the court sides with the creditors, the commonwealth will not be able to pay for essential services like fuel for patrol cars or firetrucks, the governor said.
Garcia Padilla has said in the past that he will pay essential services before creditors.
"Our creditors are … arguing to the court that the governor of Puerto Rico has threatened them saying he will pay essential services before them… hell yes," the governor said during the event. "[But] I will not be in that position. It will be a judge who will decide that."
PROMESA would create a seven-member oversight board that would have the power to require balanced budgets and fiscal plans, as well as to file debt restructuring petitions on behalf of the commonwealth and its entities in a federal district court as a last resort if voluntary negotiations fail.
Garcia Padilla emphasized the importance of the bill as a first step toward putting the commonwealth back on track fiscally.
"Without the bill, fixing the economy will be like building the Eiffel tower with a screwdriver," he said. "You need tools."
The panelists also discussed concerns that may prompt lawmakers to amend or vote against the bill.
One concern from Democrats stems from a provision that would allow Puerto Rico's governor to temporarily let employers pay employees who are less than 25 years old a minimum wage of $4.25 per hour instead of the federal minimum wage of $7.25.
Garcia Padilla and Pedro Pierluisi, Puerto Rico's nonvoting representative in Congress, both said concerns over the provision are unfounded because no Puerto Rico governor would opt in to that provision.
"This language is unnecessary … but it is there," Pierluisi said.
The resident commissioner also addressed a primarily Republican concern that the bill will allow the oversight board to elevate pensions over GO debt. There is language in PROMESA that says the board-approved fiscal plan for Puerto Rico should provide adequate funding for Puerto Rico's pension system, he said, but the bill also states that any restructuring should respect the relative rights of creditors under current territory law, which puts GO bondholders above pensions.
Another concern shared among Democrats is the current process for selecting the board. Appointment power rests with congressional leaders and the president, and the bill only requires that one board member either have a primary residence or place of business on the island.
Despite that requirement, Pierluisi said there is nothing in PROMESA that prohibits the leaders from appointing people linked to Puerto Rico.
"I tend to expect three or four members of this board will have connections to Puerto Rico as well they should," he said.
Garcia Padilla reiterated the desire for Puerto Ricans on the board, but added that he wants "capable Puerto Ricans" and members who are "the best of the best."
Weiss agreed with the Puerto Rican officials and added that concerns about the power the board has can be alleviated because the board is designed to "do its job and disappear." The legislation says the board dissolves after four straight years of balanced Puerto Rico budgets and access to the municipal bond market.
